Remote working has taken off in recent years, partly in response to the Covid pandemic and changes in work culture. This new way of working offers several advantages, both for employers and employees. However, the rise of flexible working also raises new questions and challenges for employers. For example, consider the situation where employees want to work wholly or partly from another country. In what cases can an employee claim this as a right? Which national law then applies to the employment contract? Which national court rules on labour disputes? And what about social security and taxes? In this blog series, we address these issues. In this second part, we discuss applicable domestic law and rules on international, judicial jurisdiction.
Applicable national law
Working remotely from abroad may raise the question of which national legal system(s) the employer has to take into account. This should be determined on the basis of the Rome I Regulation. Under this regulation, the employment relationship is in principle governed by the law of the country chosen in the employment contract (the subjectively applicable law). In the absence of a choice of law, the objectively applicable law applies. Importantly, a choice of law may not result in the employee losing the protection of mandatory provisions of national law – think for instance of dismissal law – that he would have enjoyed if the parties had not made a choice of law (the objectively applicable law). In other words, regardless of the choice of law agreed by the parties, mandatory and more protective rules of another country may apply. It can be complicated for employers to ascertain exactly which rules these are, as it is necessary to determine (i) what the objectively applicable law is, (ii) which parts of it are mandatory law, and (iii) a comparison must be made between the protection these rules offer the employee compared to that of the law chosen by the parties.
Under the Rome I Regulation, the objectively applicable law is determined according to a set pattern:
- In principle, the objectively applicable law is the law of the habitual country of work, regardless of whether temporary work is done in another country. If the place of work structurally shifts to another (EU) country, the habitual work country changes and thus also the objectively applicable law. If in that situation no choice of law is made for Dutch law, Dutch law will no longer apply.
- If it is not possible to determine an habitual country of work, the country of establishment of the employer who hired the employee must be relied upon.
- The above may be departed from if it appears from the totality of the circumstances that the employment contract is more closely linked to another national legal system. In that case, the labour law of the other legal system will apply. Important factors for this ‘escape clause’ are, for example, where the employee pays income tax and where the employee is insured for social security.
Please note that regardless of the outcome of the subjectively or objectively applicable law, the employment relationship is subject to provisions of special mandatory law of the country where the employee is working. These so-called ‘priority rules’ are provisions to which a country attaches such importance for the enforcement of its public interests that they must be applied to any case falling within their scope. What qualifies as special mandatory law varies from country to country. Dutch provisions of special mandatory law include, for example, the statutory minimum wage, the Working Hours Act, the Working Conditions Act and the General Equal Treatment Act.
Competent national court
Remote working from abroad may entail a change in the competent national court. For international jurisdiction in employment matters, the so-called Brussels I bis Regulation is most relevant in practice. Under this regulation, the employee can litigate in several places. He can go to court in the place where or from where work is habitually performed or the last habitual workplace. In addition, the courts of the Member State of the employer’s domicile have jurisdiction. If the employer has no domicile in the territory of a Member State, but has a branch, agency or other establishment, the domicile shall be treated as equivalent. If no habitual place of work can be established, proceedings may be brought at the place where the establishment is or was located that hired the employee.
The employer, on the other hand, can only sue the employee in the employee’s country of residence. In that context, it is important to note that agreeing a choice-of-court clause in the employment contract need not have any effect. Indeed, deviation from this rule can only be stipulated after the dispute has arisen.
If an employee works remotely from abroad, this may have implications for, among other things, the national law applicable to the employment relationship and the jurisdiction of the national court. Depending on the situation, it may be wise to make agreements on both topics in the employment contract. This can prevent employers from being faced with surprises afterwards. Want to know more about working remotely from another (EU) country or have questions about this topic? Please feel free to contact Caroline Mehlem, attorney at law Employment, Employee Participation and Pension.